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Item 2. Management’s Discussion and Analysis

2025-07-31 compared with 2025-05-01 · 47 added, 46 removed, 174 unchanged (35% of the section changed)

59 unchanged sentences

Critical accounting policies are those that, in management’s view, are most important in the portrayal of our financial condition and results of operations.

Management believes there have been no material changes during the three months ended March 31, 2025, to the critical accounting policies discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC.

Management believes there have been no material changes during the three months ended June 30, 2025, to the critical accounting policies discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC.

Results of Operations

Total revenue

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(in thousands, except %)

Revenue from products and services

Revenue from products and services increased $30.7 million, or 22%, during the three months ended March 31, 2025, compared to the same period in 2024.

Revenue from products and services increased $40.0 million, or 27%, and $70.7 million, or 25%, during the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The increase was primarily due to an increase in product volume that was due to the increase in our surgeon user base, continued expansion of our new product portfolio, and increasing adoption of our technology.

Cost of sales

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(in thousands, except %)

Cost of sales

Cost of sales increased $12.1 million, or 29%, for the three months ended March 31, 2025, compared to the same period in 2024.

The increase was primarily due to an increase in product volume and an increase in stock-based compensation.

We have entered into Development Service Agreements for the development of a wide variety of potential products and intellectual property.

Under these agreements, future royalty payments for product and/or intellectual property rights may be paid in either cash or restricted shares of our common stock at the election of the developer, depending on the terms of the agreement.

Certain of these agreements were amended to remove the cash royalty option and require settlement in restricted shares of our common stock.

Stock-based compensation associated with these awards was higher during the three months ended March 31, 2025 as the vesting conditions of certain of these amended awards were deemed probable during the current period.

Cost of sales increased $13.5 million, or 31%, and $25.5 million, or 30%, for the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The increase was primarily due to an increase in product volume.

Operating expenses

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(in thousands, except %)

3 unchanged sentences

Litigation-related expenses

Amortization expense

Amortization of acquired intangible assets

Restructuring expenses

1 unchanged sentence

Research and development expenses .

Research and development expenses decreased $1.4 million, or 8%, for the three months ended March 31, 2025, compared to the same period in 2024.

The decrease during the three months ended March 31, 2025 was primarily due to a decrease in stock-based compensation related to our Development Service Agreements and a decrease in personnel.

Research and development expenses decreased $0.8 million, or 4%, and $1.8 million, or 5%, for the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The decrease during the three months and six months ended June 30, 2025 was primarily due to a decrease in stock-based compensation.

Sales, general and administrative expenses.

Sales, general and administrative expenses increased $13.4 million, or 12%, during the three months ended March 31, 2025, compared to the same period in 2024.

Sales, general and administrative expenses increased $5.8 million, or 5%, and $19.2 million, or 8%, during the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The increase was primarily due to higher compensation-related costs and variable selling expenses associated with the increase in revenue, and our continued investment in building our strategic distribution channel.

Litigation-related expenses.

Litigation expenses increased $7.8 million, or 176%, for the three months ended March 31, 2025, compared to the same period in 2024.

The increase was primarily related to a litigation settlement during the current period.

Amortization expense.

Amortization expense increased $0.2 million, or 6%, during the three months ended March 31, 2025, compared to the same period in 2024.

The increase in amortization expense is primarily due to the amortization of internally-developed software that has been placed in service.

Litigation-related expenses decreased $0.5 million, or 24%, and increased $7.3 million, or 112%, for the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The increase for the six month period ended June 30, 2025 was primarily related to a litigation settlement during the three months ended March 31, 2025.

Amortization of acquired intangible assets.

Amortization of acquired intangible assets remained consistent for the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

Restructuring expenses.

Restructuring expenses decreased $0.4 million, or 53%, during the three months ended March 31, 2025, compared to the same period in 2024.

The decrease in restructuring expenses is primarily due to costs associated with the relocation of office facilities in Paris, France in the prior period that did not recur.

Restructuring expenses decreased $0.1 million, or 95%, and $0.5 million, or 59%, during the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The decrease in restructuring expenses is primarily due to costs associated with the relocation of office facilities in Paris, France and personnel related expenses in the prior period that did not recur.

Total interest expense and other expense, net

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(in thousands, except %)

2 unchanged sentences

Loss on debt extinguishment

Gain on derivative liability

(Loss) gain on derivative liability

Other income, net

Total other expense, net

Interest expense, net, increased $2.5 million, or 47%, during the three months ended March 31, 2025, compared to the same period in 2024.

Interest expense, net, increased $6.5 million, or 112%, and $9.0 million, or 81%, during the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The increase in interest expense, net, was primarily due to drawing an additional $50.0 million on the Braidwell Term Loan in October 2024, and the amortization of debt discount associated with the 2030 Notes.

Net cash and non-cash interest was $5.3 million and $2.5 million, respectively, for the three months ended March 31, 2025.

Loss on debt extinguishment increased $17.6 million, or 100%, during the three months ended March 31, 2025, compared to the same period in 2024.

Net cash interest was $5.3 million and $10.6 million for the three and six months ended June 30, 2025, respectively.

Net non-cash interest was $7.0 million and $9.5 million for the three and six months ended June 30, 2025, respectively.

Loss on debt extinguishment increased $17.6 million, or 100%, during the six months ended June 30, 2025, compared to the same period in 2024.

The increase in loss on debt extinguishment relates to the redemption of 80% of the 2026 Notes.

Gain on derivative liability increased $17.4 million, or 100%, during the three months ended March 31, 2025, compared to the same period in 2024.

The increase in gain on derivative liability relates to the change in the valuation of the derivative liability associated with 2030 Notes from inception to March 31, 2025.

Other income, net, increased $0.2 million, or 186%, during the three months ended March 31, 2025, compared to the same period in 2024.

The increase in other income, net, during the three months ended March 31, 2025, was primarily due to fluctuations in foreign currency rates.

(Loss)/gain on derivative liability increased $16.8 million, or 100%, and $0.6 million, or 100%, during the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The increase in (loss)/gain on derivative liability relates to the change in the valuation of the derivative liability associated with 2030 Notes from inception to June 30, 2025.

Other income, net, increased $0.8 million, or 537%, and $1.1 million, or 385%, during the three and six months ended June 30, 2025, respectively, compared to the same period in 2024.

The increase in other income, net, during the three and six months ended June 30, 2025, was primarily due to receiving the employee retention credit and fluctuations in foreign currency rates.

Income tax provision

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(in thousands, except %)

Income tax benefit

The change in the income tax benefit for the three months ended March 31, 2025, compared to the same period in 2024, was primarily related to the recognition of income tax benefits in several jurisdictions.

The change in the income tax benefit for the three and six months ended June 30, 2025, compared to the same period in 2024, was primarily related to the recognition of income tax benefits in several jurisdictions.

Liquidity and Capital Resources

19 unchanged sentences

We have disclosed all material accruals for pending litigation or investigations in Note 9, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Cash and cash equivalents were $153.2 million and $138.8 million at March 31, 2025, and December 31, 2024, respectively.

Cash and cash equivalents were $157.1 million and $138.8 million at June 30, 2025, and December 31, 2024, respectively.

We believe that our existing funds, cash generated from our operations and our existing sources of and access to financing are adequate to satisfy our needs for working capital, capital expenditure and debt service requirements, and other business initiatives we plan to strategically pursue.

Summary of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

6 unchanged sentences

Operating Activities

We used cash of $5.0 million from operating activities for the three months ended March 31, 2025, which is primarily related to inventory purchases to support the growth of our business and commercial launch of new products, offset by the timing of cash payments and receipts.

Cash provided of $10.5 million from operating activities for the six months ended June 30, 2025, primarily driven by favorable working capital changes, partially offset by inventory purchases and the timing of cash payments and receipts.

Investing Activities

We used cash of $11.6 million in investing activities for the three months ended March 31, 2025, which is primarily related to the purchase of surgical instruments to support the growth of our business and commercial launch of new products.

We used cash of $23.8 million in investing activities for the six months ended June 30, 2025, which is primarily related to the purchase of surgical instruments to support the growth of our business and commercial launch of new products.

Financing Activities

Financing activities provided cash of $30.8 million for the three months ended March 31, 2025, which is primarily related to proceeds from our 2030 Notes, offset by the repurchase of 80% of our 2026 Notes, the purchase of capped calls of the 2030 Notes, and payments on our revolving line of credit.

Financing activities provided cash of $31.1 million for the six months ended June 30, 2025, which is primarily related to proceeds from our 2030 Notes, offset by the repurchase of 80% of our 2026 Notes, the purchase of capped calls of the 2030 Notes, and payments on our revolving line of credit.

Debt and Commitments

As of March 31, 2025, we had $200.0 million outstanding under the Braidwell Term Loan.

As of June 30, 2025, we had $200.0 million outstanding under the Braidwell Term Loan.

The outstanding loans under the Braidwell Term Loan bear interest at the sum of Term SOFR plus 5.75% per annum.

The Braidwell Term Loan matures on January 6, 2028.

As of March 31, 2025, we had $15.0 million outstanding under the Revolving Credit Facility.

As of June 30, 2025, we had $15.0 million outstanding under the Revolving Credit Facility.

The outstanding loans under the Revolving Credit Facility bear interest at the sum of Term SOFR plus 3.5% per annum.

The Revolving Credit Facility matures on the earlier of September 29, 2027, or 90 days prior to the final maturity date of any of our 2026 Notes.

As of March 31, 2025, we had $63.3 million outstanding under the 2026 Notes.

As of June 30, 2025, we had $63.3 million outstanding under the 2026 Notes.

The 2026 Notes accrue interest at a rate of 0.75%, payable semi-annually in arrears on February 1 and August 1 of each year.

1 unchanged sentence

Based on the terms we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received.

As of March 31, 2025, we had $405.0 million outstanding under the 2030 Notes.

As of June 30, 2025, we had $405.0 million outstanding under the 2030 Notes.

The 2030 Notes accrue interest at a rate of 0.75%, payable semi-annually in arrears on March 15 and September 15 of each year.

1 unchanged sentence

Based on the terms we have the option to pay or deliver cash, shares of our common stock, or a combination thereof, when a conversion notice is received.

As of March 31, 2025, we had $2.9 million in other debts that are due in monthly and quarterly installments through maturity in 2027.

As of June 30, 2025, we had $2.8 million in other debts that are due in monthly and quarterly installments through maturity in 2027.

We have an inventory purchase commitment agreement with a third-party supplier, where we are obligated to meet certain minimum purchase commitment requirements through December 2026.

As of March 31, 2025, the remaining minimum purchase commitment under the agreement was $8.0 million.

As of June 30, 2025, the remaining minimum purchase commitment under the agreement was $7.5 million.

Contractual obligations and commercial commitments

As of March 31, 2025, there have been no material changes, outside the normal course of business, in our outstanding contractual obligations from those disclosed within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

As of June 30, 2025, there have been no material changes, outside the normal course of business, in our outstanding contractual obligations from those disclosed within the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Off-Balance Sheet Arrangements

1 unchanged sentence

Recent Accounting Pronouncements

Aside from the changes disclosed in Note 1 to the Notes to Condensed Consolidated Financial Statements (Unaudited) under the heading “Recently Issued Accounting Pronouncements,” if any, there have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended March 31, 2025, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2024, that was filed with the SEC.

Aside from the changes disclosed in Note 1 to the Notes to Condensed Consolidated Financial Statements (Unaudited) under the heading “Recently Issued Accounting Pronouncements,” if any, there have been no new accounting pronouncements or changes to accounting pronouncements during the six months ended June 30, 2025, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2024, that was filed with the SEC.

Forward Looking Statements

31 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis